Hog producer Prestage Farms Inc. and two other livestock companies in North Carolina have signed deals to import 750,000 metric tons (826733.48 tons) of corn from Brazil in the wake of near-record U.S. prices, Senior Vice President John Prestage told Reuters. Prestage said costs were currently about 5 percent lower to import corn from Brazil than transport it from the Midwest.
The imports, made through agribusiness companies such as Bunge Ltd and Archer Daniels Midland Co., are the largest on record and come after the worst drought in half a century rallied grain prices to all-time peaks this summer.
"As it got drier and drier, we starting thinking, 'We'd better start looking around.' So then we really went to work with the South American connections," said Prestage, whose family company ranks among the top five U.S. hog producers.
It was the first official confirmation of rumors that U.S. livestock companies were importing up to 1 million metric tons of corn from Brazil. The USDA projects U.S. corn imports at a record 1.9 million metric tons in the marketing year ending Aug. 31, 2013.
Livestock producers in the Southeast in years past have imported feed wheat from Britain, and more recently cattle feedyards in Texas bought wheat from Canada in August.
The United States is the world's largest exporter of corn, soybeans and wheat, but the drought has slashed this year's corn production to the smallest in six years.
As the weather turned hot and dry in late spring and early summer, Prestage said he and his family switched their animals to wheat, primarily brought in from Canada.
But by June, they and other livestock producers in the area realized that U.S. government forecasts of a bountiful corn harvest in the United States would not be realized, and started their preparations to import corn from South America.
The imported corn is slated to arrive in 15 cargoes of about 50,000 metric tons each over the next six months, and the first is scheduled to arrive at the Port of Wilmington, North Carolina, next week.
Prestage said the purchases were made jointly by his family company, Murphy-Brown LLC, a subsidiary of Smithfield Foods Inc., and poultry company Nash Johnson & Sons' Farms Inc. The three companies are partners in Wilmington Bulk LLC, a grain and bulk commodity import/export facility at the Port of Wilmington.
He said the companies were trying to buy more corn and other feed grains from South America and other sources.
Dave Witter, manager of corporate sustainability and communications for House of RaeFord Farms - a poultry cooperative in which Nash Johnson & Sons' is a member - confirmed the Brazilian corn purchases on Wednesday.
He said the company was exploring future imports of soybean meal, but that nothing would be decided on that matter "until after the first of the year."
A Smithfield spokeswoman declined comment.
Chicken producer Pilgrims Pride Corp, majority owned by Brazilian meat producer JBS SA, said earlier this summer that it was seeking to import Brazilian corn.
John Prestage said Prestage Farms raises 170,000 sows and 15 million turkeys, which in total consume 50 million bushels (1.27 million metric tons) of corn each year.
Livestock and poultry producers in North Carolina and neighboring states rely heavily on rail shipments of feed grains from the Midwest. North Carolina is the country's second-largest hog-producing state but ranks just No. 22 in corn production.
Prestage said his company had never relied on this volume of imported grains. It's making him nervous, even though he said staff from Bunge and ADM were trying to calm his worries.
"They've assured us everything's fine," he said, but added, "every boat is a question mark" until it arrives at the port.